Alexander M. Cutler
1951–

Chairman, president, and chief executive officer, Eaton Corporation

Nationality: American.

Born: May 28, 1951, in Milwaukee, Wisconsin.

Education: Yale University, BA, 1973; Dartmouth College, MBA, 1975.

Career: Cutler-Hammer, 1975–1977, financial analyst;
1977–1979, business group controller; Eaton Corporation,
1979–1980, division controller; 1980–1982, assembly plant
manager; 1982–1985, manager of U.S. Power Distribution Division;
1985-1986, general manager of U.S. Industrial Control and Power
Distribution Operations; 1986–1989, president of Industrials Group;
1989–1991, president of Controls Group; 1991–1993, executive
vice president of Operations; 1993–1995, executive vice president
and COO of Controls; 1995–2000, president and COO; 2000–,
chairman, president, and CEO.

■ In less than 20 years with Eaton Corporation, Alexander M. Cutler
became president, chairman, and chief executive officer of the company
that had become the second-largest manufacturer of hydraulic equipment and
the largest maker of truck transmissions in the United States. Eaton
started out as a provider of automotive parts; Cutler's vision and
his ability to act upon that vision made him highly instrumental in the
diversification of the company into the multinational manufacture of fluid
power systems; distribution and control systems; automotive parts;
aerospace equipment; and electrical power quality, distribution, and
control systems.

COMPANY GROWTH THROUGH MERGERS, ACQUISITIONS, AND DIVESTITURES

Cutler began his career in 1975 as a financial analyst with Cutler-Hammer.
Created in Milwaukee, Wisconsin, in 1893 by Harry T. Cutler (who bore no
relation to Alexander Cutler), Franklin S. Terry, and Edward West Hammer,
the company first patented a starting box for motors. Through an
acquisition, it added rheostats and light dimmers for theaters to its
product line and eventually became a pioneer in electricity control.
Through further acquisitions and the development of 54 patents,
Cutler-Hammer's sales soared from $193,000 in 1900 to $12 million
in 1920.

The young Eaton Corporation, which began in 1911 in Bloomfield, New
Jersey, when J. O. Eaton, Henning O. Taube, and V. V. Torbensen started
the Torbensen Gear and Axle Company, also grew largely through
acquisitions. In its first year the company manufactured seven truck axles
by hand; six years later it produced 33,000 axles. By 1970 it had
undergone more than a dozen mergers and acquisitions, vastly expanding its
line of automotive products.

Eaton acquired Cutler-Hammer in 1979—and along with it, Cutler, who
became a division controller. He was promoted to manager of the Power
Distribution Division in 1982 and general manager of the Industrial
Control and Power Distribution Operations for the United States. Before
long, Cutler had his eye on Westinghouse, the electric-industry giant that
in the late 1800s developed the component that led to alternating current
surpassing direct current as the world standard in electricity delivery.
In the 20th century, Westinghouse became a nuclear-energy powerhouse,
supplying nuclear-generated electricity to the navy, national defense
systems, television companies, and the general populace.

Cutler was looking to make Eaton a major player in the
electrical-distribution and control industry and was impressed with the
strategic directional change Westinghouse had made in that sector during
the late 1980s and early 1990s. In January 1994 Eaton merged Westinghouse
into its Cutler-Hammer division in what became one of the biggest
acquisitions in the electric industry's history. Throughout the
1990s Eaton made 50 acquisitions while divesting itself of 48 less
profitable divisions. In 2000 Cutler was named chairman, CEO, and
president of the company. By 2004 Eaton boasted 48,000 employees and had
manufacturing facilities in more than 20 countries and product sales in
more than 50.

A MAN OF ACTION

A brief description of Eaton on the National Leadership Council's
Web site declared, "Eaton plays for keeps—if it can't
win, it doesn't play," a philosophy clearly evident in
Cutler's management style. Robert Sherefkin wrote in
Crain's Cleveland Business
, "Alexander Cutler, the new chief executive officer of Eaton
Corporation, has wasted little time shaking up the supplier"
(September 11, 2000). After rising to the head of the company, he almost
immediately announced plans to sell off Eaton's cockpit-switch
business, which manufactured switches used in automobile door locks,
mirrors, seats, and windows. Cutler made the decision to sell the business
while it was still profitable; its sales the previous year had totaled
$330 million. Proceeds from the sale were used to pay off debt or
reinvested in the company, allowing Eaton to focus more heavily on its
engine and drive-train divisions. Sherefkin wrote that, according to
analyst Kent Mortensen of Robert W. Baird & Company of Milwaukee,
the probable reason for Cutler's decision was that Eaton had not
developed the "critical mass to lead the consolidation of vehicle
interiors, where its switches are used. 'So it was fish or cut
bait, and they decided to cut bait'" (September 11, 2000).

In his CEO message on Eaton's Web site, Cutler wrote, "Eaton
has changed. We have transformed our company from a manufacturer of
vehicle components into a diversified industrial enterprise."
Cutler always searched for the most lucrative mix of products, acquiring
and divesting appropriately in order to achieve that goal. As the demand
for cars and trucks decreased, he focused more heavily on the industrial
and commercial controls divisions. He led Eaton to take advantage of two
huge challenges that the auto industry faced: improving both gas mileage
and emission controls. He also readily positioned the company to avail
itself of the opportunity that was presented, and missed by many electric
companies, when the industry deregulated and the demand for power surged.
In an article in
Tirekicking Today
, Cutler was reported as saying, "It's necessary to know
what adds true value to a product, and what does not. Who are the value
creators and who are the value destroyers?" (September 1998).

GROWTH UNDER HIS LEADERSHIP

After Cutler became chairman and CEO, Eaton spun off its
semiconductor-equipment business, which became Axcelis Technologies and of
which Cutler became a board member. In a series of moves that evoked
images of a game of Monopoly on an international scale, in 2001 Eaton
purchased Sumifomo Heavy Industries' 50 percent share in a
fluid-power joint venture, which became Eaton's first wholly owned
Japanese business. Eaton then sold its Switch/Electronics Division for
$300 million and later became Lockheed Martin's primary fluid-power
system supplier for the billion-dollar Joint Strike Fighter program. The
subsequent additions of several other such contracts brought
Eaton's aerospace-industry sales to almost $2 billion within a
six-month period. Cutler noted that the Joint Strike Fighter contract in
particular was a major win for Eaton, proving that they were forerunners
in the research and development of high-pressure fluid-power systems for
aircraft.

Attesting to Cutler's vision for streamlining Eaton's
product line, the company sold its Navy Controls business in 2002 for
$92.2 million; bought the remaining 40 percent interest in its Jining
Eaton Hydraulica Company in China; acquired the hose, tubing, and
fluid-power systems connector division of Dana Corporation for $130
million; and bought Mechanical Products' line of aerospace circuit
breakers. Eaton later won an $84 million contract with the Boeing Company
to provide high-pressure hydraulic and other systems for the U.S. Air
Force. In 2003 it acquired Commonwealth Sprague Capacitor's power
systems and the electrical division of London-based Delta.

When introducing Cutler to a class of students at the Tuck School of
Business at Dartmouth College, instructor Sydney Finkelstein noted that
one of the major principles in mergers and acquisitions (M&A) was
that they must "augment, regenerate, or create new competitive
advantages." Finkelstein pointed out that, spearheaded by Cutler,
Eaton had done just that and, "as such, represents a great
opportunity to see the M&A principle in action."

PERSPECTIVE ON PEOPLE, PRINCIPLES, AND PARTNERSHIPS

In an interview with
Design News
, Cutler stressed the importance of teamwork among design engineers and
the need for those engineers to get out of the lab, into the marketplace,
and around customers. He said that people who design products for a
consumer must know what the consumer wants and understand his problems,
and that meeting with customers was not just necessary, it was mandatory.
"That's really how you get the creative juices running, and
it's how you ensure that you're solving the problems your
customers really need solved," he said (March 6, 1995).

During the interview, Cutler said that the rapidly changing environment
"puts a tremendous premium on employee speed and
flexibility." His philosophy, however, was "simplify first,
automate second." Rather than using technology to replace
employees, he preferred to use technology as a way to help them become
more productive and flexible. When asked by the interviewer how such a
huge company could remain efficient, Cutler commented that the most
important factor was communication, which meant moving away from the
traditional management style and becoming "a facilitator, a coach,
a communicator, whatever word you want to use" (March 6, 1995).

Cutler wrote in his CEO Web-site message that while Eaton's
business had changed, their principles had not. He noted three fundamental
principles he believed helped Eaton grow as a business and its employees
grow as individuals: innovation—"We value innovation and
change as a source of strength";
impact—"High-performance products, employees, and operations
make a positive impact on the world around us"; and
integrity—"We care about how we get results." He
wrote: "Eaton values, Eaton people, and the power of one integrated
operating company are what make us strong. They're also what drives
our success."

MANAGING ASSETS AND EDUCATION

Cutler believed that to keep his company on the cutting edge, it was
essential to provide its employees with continuing education and
efficiently manage its assets. With the goal of transforming his workforce
in mind, he was a major proponent of the Eaton Business System, an
extensive and sweeping program to systematically monitor the
company's assets and employees. Cutler's idea was to remove
what he called the "silos," or barriers, from between each
business unit in order for managers to learn from each other's
experiences.

Eaton University was launched shortly after Cutler's rise to
chairman and CEO. It began as an instructor-based management-training
program but soon became an e-learning facility. Quickly added to the
original e-library was a wealth of material acquired from an outside
organization, and general business courses were later added that trained
managers to set performance goals, reward employee performance, develop
coaching skills, and provide general career development. On the
Alchemy
Web site, Cutler commented that the program was about "capturing
the benefits of diversity, scale, and rapid transfer for best practices
and turning that into the 'power of one'" (December
3, 2002).

TRIM TO SURVIVE

In the process of keeping Eaton profitable and on the cutting edge, Cutler
had the unpleasant responsibility of cutting jobs. Between 2001 and 2002,
Eaton closed 34 factories and slashed 12,000 jobs. Even though the
cockpit-switch works was only a small part of Eaton's huge
Automotive Components Group, its sale eliminated more than four thousand
employees in eight plants in North America, South America, and Europe.
While Cutler did what he felt was necessary for his company's
overall health, he remained aware of the effects it had on individuals.
The
Taipei Times
reported that Cutler said in an interview, "When you go through
the kind of human trauma that organizations go through when they downsize,
there's a very natural tendency to be very, very careful about how
you add back resources" (November 4, 2001).

After the general downturn of the U.S. economy in the early 2000s, Cutler
announced in 2004 that the previous year had been a very good one.
Fourth-quarter earnings in 2003 surpassed expectations, with sales growth
of 17 percent and a net-income increase of 70 percent—from $67
million in 2002 to $114 million in 2003.

See also
entry on Eaton Corporation in
International Directory of Company Histories
.